How Nonprofits Can Navigate Political Engagement and Maintain Public Trust

On August 28, 2024, the National Religious Broadcasters (NRB), a District of Columbia nonprofit corporation exempt under Section 501c3 of the Internal Revenue Code, along with two churches, filed a lawsuit against the Internal Revenue Service (IRS). The lawsuit challenges the constitutionality of the Johnson Amendment—the provision in the code that prohibits 501c3 organizations from engaging in partisan electoral and political activities. The plaintiffs argue that their right to free speech is being improperly chilled by the Johnson Amendment, as violating this provision can result in penalties, including the loss of tax-exempt status.

According to Church Times, NRB President and CEO Troy Miller stated: “We believe that all nonprofits should have the constitutional right to freely express their point of view on candidates, elections, and issues on the ballot. Our challenge to the Johnson Amendment is about securing the future of free expression for all Americans, particularly those standing in the pulpit.”

Without enforcement, 501c3 organizations could devolve into politically driven entities, diverting resources from their missions.

Given these ongoing legal challenges, it’s essential for 501c3 organizations to understand the current legal boundaries regarding political activities, especially during an election year—and beyond.

Historical Legal Context

The constitutionality of the Johnson Amendment has previously been upheld in two high-profile cases: Christian Echoes National Ministry v. United States in the Tenth Circuit and Branch Ministries v. Rossotti in the District of Columbia Circuit, where the courts ruled that tax exemption is a privilege, not a right, and that the limitations on political activity imposed by the Johnson Amendment do not violate First Amendment free speech protections.

However, the Supreme Court has yet to rule directly on the Johnson Amendment’s constitutionality, which may be the ultimate goal of NRB’s lawsuit.

Balancing Free Speech and Nonpartisanship

Nevertheless, the prohibition against political campaign intervention remains the law, and 501c3 organizations must comply with the Johnson Amendment or risk their tax-exempt status and the imposition of other penalties under federal and state laws. Engaging in even a single prohibited act could result in the revocation of a nonprofit’s tax-exempt status.

Despite the IRS’s limited enforcement of the Johnson Amendment, its existence is crucial for protecting the nonpartisan nature of charitable nonprofits. Without enforcement, 501c3 organizations could devolve into politically driven entities, diverting resources from their missions. Preserving this law allows these nonprofits to focus on charitable activities, including civic engagement and issue advocacy, without becoming embroiled in electioneering.

Additionally, the Johnson Amendment helps safeguard public trust in 501c3 organizations. Donors usually contribute to charities to advance meaningful charitable purposes and not to influence elections. To allow otherwise would lead to a loss of public confidence in the charitable sector and contribute to a polarized society shaped by dark money in elections funneled through charities.

The NRB lawsuit invites 501c3 organizations to reflect on navigating the fine line between fostering civic engagement and adhering to laws, which can sometimes be a complex balancing act. This requires a clear understanding of the legal boundaries that define what 501c3 organizations can and cannot do in political activity.

Legal Boundaries for 501c3 Organizations

Despite differing viewpoints, the prohibition against political campaign intervention remains law. Therefore, 501c3 organizations, whether public charities or private foundations, must navigate carefully to comply with regulations. They may not: 

• Directly or indirectly engage in or sponsor any activity that supports or opposes any candidate for public office, whether local, state, federal, or foreign
• Make campaign contributions, whether financial or in-kind
• Use organizational resources—like mailing lists, office space, staff time, websites, social media, or email communications—to assist a political candidate or campaign

In a nonpartisan manner, 501c3 organizations may:

• Create, publish, and distribute educational materials that advocate on issues of importance to the organization and in furtherance of its mission
• Comment on the performance of an elected official in such a capacity and not in their capacity as a candidate for public office
• Support voter registration drives (though private foundations are subject to certain restrictions in providing such support)
• Support get-out-the-vote (GOTV) drives
• Hold candidate forums or debates
• Advocate for a legislative hearing or investigation
• Advocate for changes to an administrative agency’s regulations (which do not constitute legislation under federal tax laws)
• Organize boycotts
• Participate in protests
• Provide general support to public charities that engage in the foregoing activities

Organizations must also be cautious of subtler forms of political intervention.

In addition, public charities may:

• Engage in lobbying so long as it is not a substantial part of the charity’s activities. Substantiality varies depending on the standard a charity chooses to follow:
• • Substantial Part Test: Under this test, all pertinent facts and circumstances, including cash expenditures, volunteer efforts, and other allocation of resources, are considered. Charities must carefully document their lobbying activities and report them on the Form 990. Some charity advisors use a rule of thumb test, providing that devoting less than 5 percent of an organization’s resources to lobbying may generally be considered insubstantial.

• • 501(h) Expenditure Test: Under this test, lobbying is measured only by expenditures, and there are clearly defined limits. Charities may elect to have their lobbying activities measured under this standard by filing a very simple Form 5768. Under this test, charities can lobby without risking their tax-exempt status if they do not exceed specific (and reasonably generous) expenditure limits. Additionally, charities are not subject to limits on lobbying activities that do not require expenditures, such as volunteer efforts. For more information on the 501(h) Expenditure Test, see “Taking the 501(h) Election” from the National Council of Nonprofits.

• Establish and affiliate with a 501c4 organization that, under federal tax law, is not subject to a public charity’s lobbying limits and can engage in political campaign intervention so long as it is not its primary activity. See Regan v. Taxation with Representation of Washington, which held that the Section 501c3 prohibition of substantial lobbying was constitutional, concluding that an organization’s right to speak need not be subsidized.

Private foundations may provide general support to public charities that lobby, subject to certain requirements. See “Private Foundations May Advocate” from Bolder Advocacy, Alliance for Justice.

Nuances and Compliance

While avoiding explicit endorsements is straightforward, 501c3 organizations must also be cautious of subtler forms of political intervention. For example, using code words in a communication that might be reasonably interpreted as a favorable or critical reference to a specific candidate or party during an election season might constitute prohibited electioneering.

The IRS’s Revenue Ruling 2007-41 provides 21 examples illustrating these nuances, recognizing that 501c3 organizations may take positions on public policy issues. This includes issues that divide candidates in an election for public office, provided that they avoid any issue advocacy that functions as political campaign intervention. It explicitly states: “Even if a statement does not expressly tell an audience to vote for or against a specific candidate, an organization delivering the statement is at risk of violating the political campaign intervention prohibition if there is any message favoring or opposing a candidate.”

Key factors in determining whether a communication results in political campaign intervention include the following:

• Whether the statement identifies one or more candidates for a given public office
• Whether the statement expresses approval or disapproval for one or more candidates’ positions and/or actions
• Whether the statement is delivered close in time to the election
• Whether the statement refers to voting or an election
• Whether the issue addressed in the communication has been raised as an issue distinguishing candidates for a given office
• Whether the communication is part of an ongoing series of communications by the organization on the same issue that are made independent of the timing of any election
• Whether the timing of the communication and identification of the candidate are related to a non-electoral event, such as a scheduled vote on specific legislation by an officeholder who is also a candidate for public office

A nonprofit’s mission statement and governing documents can be crucial in defining its permissible advocacy efforts.

If creating, publishing, and distributing educational materials, 501c3 organizations must ensure they are not doing so at the request of a political candidate or distributing the materials in a partisan manner.

In the context of voter registration and get-out-the-vote (GOTV) drives, public charities must encourage voting by all who are eligible and must not select targeted areas based on party affiliations.

When hosting candidates to speak, public charities must not frame questions to show partisan bias or provide greater opportunities to certain candidates over others. In addition, they must not ask candidates to pledge to support the charity’s position if elected as this may evidence tacit endorsement of a candidate who makes such a pledge.

Mission Statements and Advocacy

A nonprofit’s mission statement and governing documents can be crucial in defining its permissible advocacy efforts. If a 501c3 organization engages in issue advocacy unrelated to its mission, particularly on a wedge issue between political candidates or parties, such advocacy may suggest that the organization is unlawfully attempting to influence an election. The governing documents may be viewed by regulators as a framework for the types of issue advocacy that are aligned with the organization’s charitable purposes and permissible.

Determining whether a 501c3 organization’s activities constitute prohibited campaign intervention usually considers all facts and circumstances involved. Nonprofit organizations should train staff and volunteers on the distinction between advocacy, lobbying, and political campaign intervention to avoid inadvertent violations of the Johnson Amendment.

Clear guidelines and regular audits of advocacy activities can help ensure compliance with IRS regulations while maximizing the organization’s impact. By understanding the legal boundaries and implementing diligent practices, nonprofits can effectively advocate for their missions without risking their tax-exempt status or public trust.